tv [untitled] March 14, 2012 1:00pm-1:30pm PDT
we are joined by our extended members. victor, you have any announcements for us today? >> please silence all cell phones and electronic devices. items will appear on the march 20 agenda unless otherwise stated. item number one, hearing to include financial updates and information on budget instructions and process for fiscal year 2012-2013. item #2 -- hearing to receive update on departments on
children, yes, and families and the five-year plan. >> good afternoon. each year, our office prepares a joint report production for the next several fiscal years to give you a sense of the financial challenges you face. we issued this report last week. we have available copies of the report here today. very briefly, we will hit some of the highlights. the news is significantly improved versus our projections last year. you can see the challenges remain significant. our office projects $170 million
general fund shortfall next fiscal year, growing each of the three fiscal years thereafter. approaching 500 million in 15- 16. those numbers, meaning the difference between revenue and expenditures, it also shows you as a change versus the year before. what that is an illustration of is the fact that the way the mayor and the board balance each year's budget does have an impact on future fiscal years to the extent that you were to close the shortfall with $170 million and ongoing solutions, and then you would face an incremental $142 million the year after. that is the way the math looks.
these numbers are said definitely reduced from the numbers we produced last year. that has served to reduce the shortfalls over this horizon. equally, our view of the recovery in san francisco and what it means for tax revenues is significantly brighter-year than it was this time last year. that echoes nationwide trends. supervisor chu: what you are saying is that if we balance this current year's budget with onetime sources, our deficit will be as large as 312. if we budget -- balance it with ongoing solutions, it will be a deficit as large as 142. >> that is right. this'll be the first time you
balance these years at the same time. just to briefly what you through some of the key assumptions. the joint report is intended to be a status quo right -- projection of the policy choices that have been made by the mayor and the board of supervisors. it assumes no changes in staffing levels it is intended to provide a basis point from which you can plan the coming year's budget. some of the key assumptions are important because they drive the numbers significantly. we try to be explicit regarding all of the assumptions we are making. we will hit some of the highlights today. the most important assumption, of course, has to do with what will occur with the city's revenue over this four-year horizon. we now expect the city to reach its prior year peak revenues in general fund tax revenues in the
current fiscal year. by the end of this current fiscal year, we will have grown back to our pre-recession levels and reach that same level with growth continuing in future years. this is a time when the -- when the recovery has occurred in san francisco faster than we expected. the general thinking was that there was a large loss of revenues here and everywhere in california. at one point, we expected to not get back to prior peak until 13-14 or 15-16. we expect the trend to continue. no major changes in service levels are a sand, other than those we explicitly talk about. those are the result of the merit-board action that starts the process rolling. when we talk about uncertainties over the production horizon, the
most significant has to do with the state and federal budget. the state and federal government provide $1 out of every $5 and our general fund. we had significant risks associated with both. supervisor chu: in terms of the preliminary estimate, that number has ranged at different levels in the past two years. this year, it is higher than what we have seen in the past. can you speak to wide-eyed is a good preliminary estimate? -- why that is a good preliminary estimate? >> we do not want to pretend that this is a precise number. by any means. the level of uncertainty regarding the state and federal budgets are higher than they have been in many years. as a result of a couple of things.
we can touch on some specific programs, but generally, we have cuts that have been adopted by the state budget that have not yet been implemented. it is unclear when the state will implement them. these are choices that the state legislature has made. in some cases, the cuts are being staged by the courts. we have litigation that needs to be decided. in other cases, we have cuts that we are in the process of implementing. we're still trying to get our arms around them financially. the most significant of these is the redevelopment agency. we continue to work to clarify what those impacts are and we hope to have cancer shortly. we have all of this current year uncertainty related to cuts that have already been adopted into law.
in some cases, they have not been implemented for many reasons. heading into next year, we have continuing state budget gaps. we do not yet know what that budget will look like. we have a preliminary proposed budget from the governor. his january budget -- by the time we reached the governors -- that changes significantly. the state shortfall has grown since the january budget. of course, we have a federal budget. for the first time, over the last couple of years, we have been dealing with dynamics of shrinking the federal funds for the first time in a long time. cuts to ryan white and other hiv aids programs. it might not be adopted by
congress until after next november's election. we have the uncertainty and it involves the actions of two different legislative bodies. in some cases, it is pending court decisions. this level of uncertainty led us to increase this allowance. by no means is this an exact number. we will expect to continue updating you on those significant risks. supervisor chu: thank you. >> we have made assumptions regarding our pension contribution rates that are driven off of actuarial analysis. our pension contribution rates are sensitive to what is going on in the market.
health rates are projected for city employees, it increased cost by 6% per year. dental about 3% per year. we have assumed no changes in labor contracts. beginning in fiscal year 2013- 2014, we have assumed a cost-of- living increase on city labor contracts. all those contracts are subject to negotiations. lastly, we assumed inflation or cost-of-living increases as well. things cost more persist today -- reverse is today -- versus today. this projection assumes inflation on all of those costs.
as we get into a little bit more detail, i will talk through the revenue side of the ledger briefly. on the revenue side, we start with our fund balance. the report assumes $94.8 million loss of fund balance versus the level used to balance the current fiscal year budget. we are now projecting to end the current year with $130 million, which is -- which assams spent down over two fiscal years. -- which assumes spend down over two fiscal years. that is a big - 2 start with. we have seen our local tax revenues performing well. we project $221 million in budget to budget growth.
that is very significant. it is almost -- it is basically to years of what we would historical the assam is an average growth. very significant -- historically assume is an average growth. the prime drivers are led by property transfer tax. we talked about this in the current fiscal year. we are not projecting -- now projecting to end the fiscal year with the $170 million in transfer taxes. given our own modeling and conversations we have with commercial real estate and economists and others, we are expecting next year's level of commercial real estate activity to accelerate further. the $170 million of the current year is an historic high for the city. we are projecting that to grow
to $195 million next year. the consensus is this market will continue to tighten and heat up before tailing off in the years thereafter. this is our most cyclical of revenue, and the most volatile, and the hardest one for us to predict. supervisor chu: could you repeat that? >> we are expecting to get to $195 million in property transfer taxes next year. that will be an historic for the city. the voters have approved higher rates on the largest class tes. that has driven a current increase in net revenue. it is also being driven by an incredible amount of investment in real estate in san francisco. real estate investment trends -- trust,